Reporter of the Economic Business: Zhao Jingzhi Editor of the Economic Business: Chen Xu
On November 4, offshore RMB rose sharply against the US dollar, regaining the 7.20 mark, and the single-day increase of exceeded 1,500 points.
Wind data shows that as of the close, the offshore RMB was 7.1780 against the US dollar, up more than 1,500 points; the onshore RMB closed at 7.1927 against the US dollar, up more than 1,200 points.
Chief macro analyst of Oriental Jincheng Wang Qing said in a written interview with a reporter from " Daily Economic News " that there are two main reasons for the surge in the RMB on the 4th:
First of all, due to the release of US employment data and the violent fluctuations in market sentiment, the overnight US dollar index fell sharply by nearly 2.0%, which directly touched the issue of RMB to appreciate significantly against the US dollar.
Secondly, the regulatory authorities have made a clear statement recently, " RMB exchange rate will continue to remain basically stable at a reasonable equilibrium level, and the RMB currency value and purchasing power will remain stable." This effectively stabilized the confidence of foreign exchange market , and to be precise, it effectively curbed the signs of rapid depreciation of the RMB from the US dollar trend alone.
Offshore RMB against the US dollar trend
RMB against the US dollar exchange rate rose sharply during the day. US dollar index short-term fell
html Since August, affected by the rapid rise of the US dollar index, the RMB against the US dollar has depreciated rapidly, but the three major RMB exchange rate indexes (CFETS\BIS\SDR) have not changed much overall, and the RMB has appreciated to varying degrees against major non-US currencies such as the Japanese yen and the British pound during the same period. This means that this round of RMB depreciation against the US dollar is mainly caused by the surge in the US dollar index, and it has a clear passive depreciation nature.The US dollar index climbed again after the Federal Reserve announced another rate hike of 375 basis points on the 3rd of this month. Faced with a strong US dollar, on the 4th, the RMB exchange rate against the US dollar counterattack, and both offshore and onshore RMB rose by more than 1,000 points.
While the RMB rose sharply, the US dollar index fell in the short term that day, with a daily decline of 1.95%, closing at 110.7839 points. At the same time, the euro, pound, Australian dollar and Japanese yen all rose by more than 1% against the US dollar.
news, the unexpected growth of the new non-farm employment population in the United States in October and the slight increase in the unemployment rate has attracted market attention.
The latest data released by the U.S. Bureau of Labor Statistics shows that the United States added 261,000 new non-farm employment in October, which fell slightly from the previous value of 263,000, but far exceeded the market expectations of 195,000. Although the number of new non-farm jobs far exceeded expectations, U.S. Labor Office data also showed that the unemployment rate in the United States rose to 3.7% in October, higher than expected 3.6% and the previous 3.5%.
Due to the release of US employment data and violent fluctuations in market sentiment, the US dollar index fell sharply by nearly 2.0%.
Wang Qing told reporters that in the context of the Federal Reserve's continued rapid rate hikes and the risk of downward decline in the global economy increased, the current global capital market sentiment fluctuates violently and is prone to major ups and downs.
On the one hand, the market has expectations that the Fed may slow down the pace of interest rate hikes in the short term; on the other hand, the global economy and the Fed's monetary policy in 2023 are very uncertain. Against this background, with the release of US employment and inflation data that are higher or lower than market expectations, market sentiment often reverses within a few trading days, which in turn causes the US dollar to fluctuate violently.
"However, this recent violent fluctuation also shows that the momentum of the rapid rise of the US dollar on one side has weakened after August, and the global foreign exchange market is turning into a horizontal wide fluctuation. As for the RMB exchange rate, the current domestic economy is generally maintaining an upward recovery momentum, and my country's current account will continue to have a large-scale surplus. fundamentals do not support the RMB to depreciate independently and quickly depreciate independently. At the same time, regulators have rich foreign exchange market adjustment tools, which can effectively increase the friction of RMB exchange rate fluctuations in the short term, curb the ups and downs, and maintain the three major and one basket of RMB exchange rate indexes basically stable." Wang Qing said.
stable exchange rate signals are released one after another, and exchange rate policy tools are sufficient
The rise of the RMB exchange rate against the US dollar is also related to the recent continuous release of the central bank's stable exchange rate signal.
On November 2, Central Bank Governor Yi Gang said that since the beginning of this year, thanks to the long-term positive fundamentals of China's economy and the implementation of normalized monetary policies in recent years, the RMB has been relatively stable against a basket of currencies, depreciating against the US dollar, but appreciated against other major currencies.
Yi Gang pointed out that in the future, the market will adhere to the decisive role of the market in exchange rate formation. The RMB exchange rate will continue to remain basically stable at a reasonable equilibrium level, and the RMB currency value and purchasing power will remain stable.
While regulatory authorities continue to speak out and release signals to stabilize exchange rate, tools for stabilizing exchange rate are also being implemented.
According to statistics, since September, the central bank has continuously issued policies in response to the sharp fluctuations in the RMB exchange rate against the US dollar.
As on September 5, the central bank issued a message that in order to improve the ability of financial institutions to use foreign exchange funds, it has decided to lower the reserve ratio of financial institutions' foreign exchange deposit by 2 percentage points from September 15, 2022, that is, the reserve ratio of foreign exchange deposits is lowered from the current 8% to 6%.
htmlOn September 26, the central bank issued an announcement stating that in order to stabilize the foreign exchange market expectations and strengthen the macro-prudent management of , it was decided to increase the foreign exchange risk reserve ratio for forward foreign exchange sales business from 0 to 20% from September 28, 2022.On October 25, the central bank announced that it had decided to raise the macro-prudential adjustment parameters of cross-border financing of enterprises and financial institutions from 1 to 1.25.
Wang Qing pointed out that looking forward to the future, at least before the end of the first quarter of next year, the Federal Reserve will continue to raise interest rates, and the US dollar index will likely remain strong in fluctuations. The inverted spread between China and the United States may also expand. This means that in the short term, the RMB may still have certain depreciation pressure against the US dollar.
"We believe that the focus of stabilizing the exchange rate at this stage is not to maintain a fixed point, but to guide the RMB to maintain a roughly similar reverse volatility pattern with the US dollar and stabilize foreign exchange market expectations. This will provide strong support for macro policy 'mainly with me and taking into account the inside and outside'."
Wang Qing said that in the future, under the adjustment of fundamental support and foreign exchange market policy tools, the risk of the RMB depreciation from the US dollar is not high, and the three major and one basket of RMB exchange rate indexes are expected to continue a stable operation trend. As the US dollar moves into a horizontal wide fluctuation state, the pressure on the depreciation of the RMB against the US dollar will also be reduced compared with the previous period.
The balance of payments status has an effective support for the future RMB trend
Economic stability is the largest basic market for the stable operation of the exchange rate. The basic balance of payments such as current account and direct investment are relatively large, which will provide effective support for the RMB exchange rate.
On November 4, the State Administration of Foreign Exchange announced the preliminary figures of my country's balance of payments statement in the third quarter and the first three quarters of 2022.
my country's goods trade still maintains a strong surplus. Image source: Xinhua News Agency
Data shows that in the US dollar, in the first three quarters of 2022, my country's current account surplus was US$310.4 billion, of which, the surplus of goods trade was US$521.6 billion, the service trade deficit was US$65.6 billion, the initial income deficit was US$162.2 billion, and the secondary income surplus was US$16.5 billion. In capital and financial accounts, the direct investment surplus was US$46.9 billion, and reserve assets increased by US$57.7 billion.
Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, said that in the first three quarters of 2022, my country's balance of international payments maintained a basic balance of payments. Among them, the current account surplus was US$310.4 billion, the highest value in the same period in history. increased by 56% year-on-year. The ratio of the surplus scale to the GDP of (GDP) during the same period was 2.4%, which continued to be in a reasonable equilibrium range; direct investment showed net inflows, and cross-border capital flows were stable and orderly.
China Minsheng Bank Chief economist Wen Bin told reporters that under the unfavorable conditions of the spread of the new crown epidemic in many places and the decline in foreign demand in the third quarter, the foreign trade surplus can still hit a record high, indicating that as my country's manufacturing transformation and upgrading continues to advance, the international competitiveness of products has been enhanced, and the diversification of trading partners has made positive progress, and the surplus of goods has a solid foundation.
Wen Bin emphasized that the quality and structure of my country's service trade are also constantly improving.In the first three quarters, my country's service trade deficit was US$65.6 billion, a 23% narrowing from the low point of the same period last year. The intellectual property fee deficit was US$23.8 billion, a year-on-year decrease of 8%. The surplus of telecommunications , computer and information service was US$13.6 billion, a year-on-year increase of more than 90%, reflecting that my country's manufacturing and service industries are constantly deepening the integration, the digital transformation process of the service industry is constantly advancing, and the revenue of high-quality service trade continues to grow.
In addition, in the first three quarters, the direct investment surplus reflecting the long-term economic development trend of US$46.9 billion, indicating that my country's economic prospects are improving in the long term, the effect of steady advancement of high-level opening up to the outside world and the continuous optimization of the business environment is revealed, and the huge market potential continues to attract foreign capital to invest and do business in China.
"Overall, my country's economy has strong resilience, sufficient potential, and wide room for maneuver. The long-term positive fundamentals will not change. The economic stabilization and improvement trend will be further consolidated, providing fundamental support for my country's balance of international payments to maintain a balance." Wang Chunying pointed out.
Daily Economic News
